Breaking the triads’ backs: Gov’t could fund crime via tax hike

Two former police superintendents advise against extreme action to eliminate smoking through high taxation. They argue that the cigarette black market, if given a shot in the arm through higher taxes, can do great harm to Hong Kong society.

As free as Hong Kong’s economy is, it is not particularly known for showing leniency to the smoking population. However, a recent survey by Hong Kong United Against Illicit Trade (HKUAIT) suggested that the Government may be chasing the wrong rabbit down the wrong rabbit hole.

The survey, commissioned to market research company Ipsos which interviewed 1,007 citizens aged 18 and above last December, showed that nearly 90% of the respondents see illicit tobacco trade as a problem that the Government should prioritise.

Jeff Herbert, Adviser to HKUAIT and a former police senior superintendent, said there has been improvement in terms of the ratio of legal cigarettes and illegal ones in the market owing to better customs enforcement. Mr Herbert, however, warned that one in every four cigarettes consumed in Hong Kong in 2014 was still illicit, and introducing excessive tobacco taxes could undermine the efforts of police and customs officials.

Blackout

“The Government is now bearing the fruit of what happened with very high tax hikes…It has taken time for government to regain a position where it can now fight against illicit trade,” Mr Herbert said. “If there is, however, another major tax hike, the Customs and Excise [Department] will be flooded again with more illegal cigarettes. Organised crimes would be strengthened instead of weakened. It [the Government] is in a position now where it’s within a stone’s throw [from] breaking the back of cigarette smuggling, and it must continue the enforcement action.”

The health authorities are pushing for enlargement of graphic health warnings on tobacco products to cover at least 85% of the visible packaging. Mr Herbert argued that such measure would also make the problem worse.

Mr Herbert encouraged law enforcement agencies to make greater use of the Organized and Serious Crimes Ordinance (OSCO) and to allocate more resources on public education to the issue.

Patrick Wong Chun-chin (黃進展), also a former senior superintendent and now Executive Director of HKUAIT, said a pack of illicit cigarette is about $23 cheaper than a legal one. About 60% of these cigarettes were transported from the mainland through land routes.

“Logically, the wider the price gap, the more appealing illegal cigarettes will become,” Mr Wong said. “Whether tax hike would be effective in discouraging smoking depends on the market share of illegal cigarettes, and with the latest statistics of 28%, it would be wiser for the Government to keep the current tax rate unchanged.”

“While we are not handling the issue of public health, failure to tackle illicit trade can be more detrimental to our teenagers as they will be easily exposed to illegal activities by triads. This would twist their value set,” Mr Wong said, complaining that getting government officials to listen to them had not been an easy task.

Financial Secretary John Tsang will announce his budget for 2016-2017 in a month’s time. The clock is counting for the veteran gatekeepers to apply some economic logics on the Government’s anti-smoking enthusiasm.

Alex Fok is a Harbour Times journalist monitoring Hong Kong’s daily political scene and diplomatic updates. He obtained his bachelor’s degree in Economics, Politics and International Studies from University of Warwick and his master’s degree in International Relations from the London School of Economics and Political Science. He is a former committee member of the Warwick-based Hong Kong Public Affairs and Social Service Society (WHKPASS) and was the chief editor of the society’s magazine – PASSTIMES.